Mojang Unchained: Why Microsoft wants Minecraft maker

Microsoft today announced it would pay $2.5 billion for Mojang, the developer of the very popular Minecraft game, a move that some analysts saw as a purchase of the massive community that's evolved around the game as much as an acquisition of the game itself.

"Minecraft has a large game community, and it's much more diverse and a different sort of game player than the traditional console market," said Brian Blau, an analyst at Gartner Research, referring to Microsoft's Xbox business. "It's a lot younger, in the kid and teen range, and that will be new to Microsoft. This will bring tens of millions into the Microsoft fold."

The game's audience is huge. Microsoft today claimed that Minecraft had been downloaded more than 100 million times on the PC, is the top game on Xbox, and the top paid app for both iOS and Android. Nearly 90% of the estimated 15 million paid PC players have signed in within the past 12 months, Microsoft added.

The deal, which had been rumored since last week, with speculation that it would be announced today making the rounds over the weekend, is expected to close before the end of the year, Microsoft said in a statement.

Microsoft also committed to maintaining Minecraft across its multiple platforms, which include Windows, Xbox, PlayStation, iOS and Android. The game is not available on Windows Phone.

But the experts believed that would change, and quickly.

"Although how this fits with [CEO Satya Nadella's] mobile-first, cloud-first strategy isn't obvious, he has emphasized the importance of games as a strategic card for winning in mobile," said Ross Rubin, principal analyst at Reticle Research, in an interview. "I expect that Microsoft will build exclusive value on top [of Minecraft] for Windows Phone. I think that will clearly be one of the main objectives."

As Rubin noted, Nadella has stressed gaming as a critical part to Microsoft's strategy. In his 3,100-word memo of July, where he laid out his vision for the company's future, Nadella said, "The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming." He followed with the promise that, "We will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft."

"That [exclusivity on Windows Phone] would likely be in the spirit of downloadable content," Rubin said.

However, Blau disagreed that Microsoft would push Windows Phone using Minecraft because that would risk losing the audience the company is, in fact, buying with the $2.5 billion. "It's possible that that might be part of a bigger strategy, but Microsoft would have to be careful or that could alienate the community," Blau said.

Windows Phone has a very small, single-digit share of current smartphone shipments, according to researcher IDC.

Instead, Blau hammered on the "community" aspect of Minecraft, and what that brings to Microsoft. "It is all about the community," said Blau. "The benefits Microsoft gets is a large and diverse community of players on an open platform, a game-builders game.

"Minecraft is not the future of Microsoft games, but it's a piece of that," continued Blau. "Microsoft really hasn't had a mobile or PC gaming strategy that has brought people into the [Windows and Windows Phone] platforms."

Ben Thompson, an independent analyst who writes at Stratechery, matched Blau in bullishness about the deal. But Thompson focused on a different, newer component of Nadella's publicly-stated strategy.

"Minecraft is more than just a game: it's a community, with a huge cloud component, developers, and, at its very essence, it's about making things," Thompson wrote in an analysis today. "What could be more productive than that?"

Thompson was pointing to Nadella's focus on productivity that the CEO outlined in July. "At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world," Nadella said then (emphasis added). "We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more."

"Minecraft, though, isn't just a great financial decision; it's also a good strategic one that fits very nicely with Microsoft's new vision," Thompson argued.

Rubin echoed that. "Microsoft has a long-standing interest in development tools and education," said Rubin of Minecraft's open-ended, build-it nature and its widespread use in schools as a teaching aid. "Those are certainly additional assets that Microsoft is buying. And it's more than just a game. Much like Angry Birds, there's a licensing business."

Thompson thought Mojang had left a lot of money on the table, not in the Microsoft deal, but in growing the business on its own, a fact that Microsoft could itself leverage. "Minecraft, though, has the potential to make a lot more money," Thompson said. "Currently, Mojang only makes money off of players once: when they buy the game. All of those additional hours of play are essentially free. Contrast this to a game like the legendary World of Warcraft, which has made somewhere between $10 and $20 billion over its lifetime through a combination of up-front purchases and subscription fees."

The founder of Mojang and original developer of Minecraft, Markus "Notch" Persson, said he would leave the company once the acquisition closes. "It's not about the money. It's about my sanity," Persson said.

In a separate post by Mojang, the company put it differently. "Microsoft acquired Mojang for a smooth 2.5 BILLION dollars," the blog stated, making sure everyone caught the billion, as in B.

Persson owns 71% of Mojang, which would make his part of the deal worth approximately $1.78 billion.

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